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Reg E ACH Debit Card Cards-Large National Retailer

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Question: 
A large national retailer is now issuing in-store debit cards, that post transactions to our bank customers account as ACH debits. These are not credit cards - they are debit cards for use only at the designated retailer - swiped and signed just like any other card - only debiting the bank account. Our customer signed up for the card at checkout, provided her banking information, and received a discount for her purchase. One month down the road, she has $900 in debit card purchases that have posted to her account on a card that she says she never received. Can you please describe what would be considered the best practices for a bank in a dispute situation like this? And does the large retailer have a Reg E responsibility here, too? I am particularly thrown here because it is clear that she authorized the ACH debits - but the card purchases were fraudulent. With no control over the instrument or the agreement associated with it, we feel a little blindsided by this new type of dispute.
Answer: 

The card arrangement described in the question is known as a "decoupled debit card." In this case, the retailer is the card issuer, not the bank. Guidelines for these disputes is found in Reg E 1005.14.

The responsibility for investigating and providing provisional credit for these decoupled card claims lies with the issuer (retailer) not the bank. The bank's only obligation is found in 1005.14(c)(1) & (2). All you have to do is provide account documentation (i.e. bank statements) to assist the issuer in investigating the claim. Also if the service provider denies the claim and revokes provisional credit, you must honor debits for 5 business days the same as if you had investigated the claim yourself.

First published on BankersOnline.com 5/20/13

First published on 05/20/2013

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